Much like traditional cash, and stocks and shares ISAs, Innovative Finance ISAs can be an effective method of saving money over the long term. Whilst IFISAs can carry more risk than other ISA options, they also give investors the opportunity to earn more in interest per annum than the traditional ISAs available. Providers like Just Investment can offer as much as 8% interest p.a on your savings – a substantial amount when compared to the standard ISA accounts offered by banks or building societies.
How can IFISAs help me save?
Innovative finance ISAs, or IFISAs, are a form of investment utilising peer-to-peer lending – that is, the lending of your funds directly to borrowers and businesses, who then pay back the amount with interest based on the length of your investment. The period of investment changes between provider and ISA offering, allowing you to make an informed decision on how to utilise your savings.
The minimum period that your savings would be held for is usually two years – great for short-term saving opportunities – and can often go all the way up to 10 years, suiting those looking for a longer period over which to save (and the extended interest rates that come with it).
Accounts can often be opened with a little as £2,000, making IFISAs an excellent entry-level investment and much more accessible to most people. As a form of ISA, IFISA investments & returns are also tax-free within your yearly ISA limit, allowing you more control over the amount you save – and also the amount you withdraw at the end of your investment period.
It’s also easy to invest into IFISAs – each provider will have some requirements, but will walk any potential investor through the process. Providers also often have brochures available with more information on what you’re investing into as well as expected returns, risks and insurances.
How safe are my savings?
Whilst no investment is truly safe, and your capital will be at risk, most IFISA companies have a set of processes in place to keep your investment as safe as possible.
There are also differences in risk mitigation between different finance sectors. Just ISA, an IFISA provider based in the Litigation Funding sector, works with the Litigation Advisory Council to assess the cases that they lend funds on to – aiming to increase the likelihood of your funds investment being used for a litigation case that succeeds.
IFISAs focused on house building and land acquisition might limit themselves to government-backed building projects only, or to fund ongoing construction in areas currently experiencing a boom in house prices and sales numbers.
IFISA providers are also regulated by the Financial Conduct Authority, or FCA, which sets out a series of standards and requirements for products by which providers must abide. It is important to note that these rules and regulations do not reduce the risks of your investment, but they do control how IFISA providers can act and what they are able to offer to investors.
Is an IFISA the right choice for me?
Innovative Finance ISAs offer a range of options to those looking to both save funds and increase their saving capabilities over time. Allowing you to control where your funds are invested, IFISAs can be an excellent choice for anyone concerned with how their money is used. Both short and long-term investment periods allow you to make the most of your savings over length of time more appropriate to your individual needs versus cash or stocks and shares ISAs
Increased interest rates, whilst also demonstrating the risks held by moving your money into IFISAs, are also generally much higher than what is commonly offered by traditional ISAs – and remain tax free as part of your yearly ISA limits. If your aim is to make your savings work for you, then IFISAs can be an effective and simple method of investment.
For more information on IFISAs and the world of litigation funding, check out justisa.co.uk and invest in justice!